Hockey Players Seek Damages
From 1970 through 2009, 22 former National Hockey League players skated and checked their way through the fast and sometimes bloody sport, only years later to find themselves suffering from the effects of concussions and head trauma.
As with football players, the NHL players claim the head trauma caused depression, memory loss, dementia, and degenerative brain disease, among other injuries, and they argue the NHL fostered a culture of violence that put them at risk.
With two class-action lawsuits pending against the NHL, seeking more than $5 million in damages, TIG Insurance Co. is seeking a judicial determination as to whether it must defend or indemnify the league and/or its board of governors (NHL BG).
TIG also filed suit against a dozen other insurers that also issued primary, umbrella and excess liability policies to the NHL at various times, seeking a ruling on whether those insurers must defend or indemnify the NHL or NHL BG.
TIG issued a primary insurance policy to the NHL for the period covering Nov. 30, 1989 through Jan. 1, 1991; an excess liability insurance in excess of $1 million from Nov. 30, 1989 through Jan. 1, 1991; and another excess liability policy for more than $121 million from Jan. 1, 1997 through Jan. 1, 2001.
In addition to denying it insured the board of governors, TIG argued its policies “do not provide coverage for intentional wrongdoing or bodily injury expected or intended by the NHL and/or NHL BG.” It also argued it did not provide coverage “for injuries in events not ‘sponsored’ by the NHL;” that the careers of the players/plaintiffs “began following the expiration” of TIG’s policies; and that it did not receive proper notice.
Experts expect the dispute to center on whether the violence and fighting during games was encouraged by the league. If that is the case, the policy exclusions that bar intended or expected injuries may let the insurers off the hook. The timeframe of when the injuries occurred may also impact when — or if —coverage was triggered.
Summary: TIG Insurance Co. wants to know if it must defend or indemnify the NHL or its board of governors against class-action allegations filed by former players who suffered head trauma.
Takeaway: If the violence was encouraged by the league, the policy’s intentional wrongdoing exclusion may apply.
Multiple Claims Linked Together
Nearly 650 investors who participated in privately funded mortgage loans arranged by Berman Mortgage Corp. (BMC) joined a 2009 class-action lawsuit filed against BMC’s principal officers after the company was placed in receivership by the State of Florida.
The complaint sought damages in excess of $168 million, alleging that BMC failed to adequately engage in due diligence or appropriate accounting standards for 41 projects.
Axis Surplus Insurance Co. sought — and won — a summary dismissal of the case in the Circuit Court for Miami-Dade County, arguing that the claim was filed outside of the coverage period for the claims-made professional liability policy.
The circuit court ruled the claim did not fall within a “Reported Wrongful Acts” provision, which allowed for coverage even if the claim was made following the policy period as long as the insured had previously given the insurer notice of a potential liability.
The U.S. 3rd District Court of Appeal for the State of Florida disagreed, and reversed that decision.
The appeals court ruled a different provision of the policy should apply — the “Multiple Claims” provision — and linked the class-action lawsuit to a prior lawsuit filed in 2007 by Robert Revitz, a private investor who sued BMC alleging the company failed to perform proper due diligence and used negligent accounting practices.
The lower court had ruled the two claims were not related and coverage was not triggered because Revitz “did not provide ‘a description of the potential damages’ that included the class action claim,” as required by the Reported Wrongful Acts provision. The class-action lawsuit sought substantially higher damages than Revitz.
The appeals court, however, said the Multiple Claims provision should govern the case because the claims are “related by common facts, circumstances, transactions, events and/or decisions” and thus, should be treated as one wrongful act.
“The fact that individual class members may have been involved in separate mortgage transactions does not negate the fact that each claim is based on BMC’s negligence in this regard,” the court ruled. It returned the case to the lower court for further proceedings on certification of the class as well as the allegations in the class-action lawsuit.
Summary: Axis may have to pay out up to $168 million should a court rule that its professional liability policy covers damages pursuant to the actions of a defunct mortgage broker.
Takeaway: The failure to provide the total amount of potential damages in an initial report to the insurer may not deter coverage if multiple claims have common facts and circumstances.
Court Rules on Excess Coverage
Viking Pump Inc. and Warren Pumps LLC, both of which used to be owned by Houdaille Industries, manufactured industrial pumps that contained asbestos, and have faced thousands of asbestos claims.
In 1985, Viking and Warren were divested by Houdaille — which had purchased $17.5 million in primary and $42 million in umbrella commercial comprehensive general liability insurance in addition to 35 excess policies through 20 different carriers.
Viking initially filed suit against Liberty, the primary and umbrella carrier, fearing Warren was draining its shared insurance coverage. That case was settled and dismissed, but then the excess insurers joined the litigation.
The case evolved into the question of when insureds are entitled to seek coverage under excess policies. The answer, according to a Delaware court, is that policyholders do not have to exhaust horizontal excess coverage when losses occur over many policy periods.
Although the decision occurred in Delaware Superior Court, the judge ruled that New York law should govern the question and the Delaware ruling was just a prediction of what a New York judge might rule, based on New York law. It was not a final decision, but it did offer some guidance into an issue that is rarely addressed by the courts.
Summary: Policyholders in long-tail cases must exhaust all primary and umbrella policies before first-layer excess policies are triggered; however, not all first-layer excess policies need to be horizontally exhausted before triggering second-layer excess policies.
Takeaway: The ruling will provide guidance to policyholders as well as provide assistance should an excess insurer be insolvent.